Green Investments and Fiscal Benefits of Tax Credits

In the pursuit of a more sustainable future, governments around the world are incentivizing businesses to adopt energy-efficient practices. One of the ways they do this is through various tax credits designed to encourage investments in clean and renewable energy technologies. In the U.S., three prominent tax credits for businesses involved in energy-related activities are Section 48C, Section 45X and Section 45W. Let’s delve into each of these credits to gain a better understanding of their purposes and benefits for manufacturing companies.

Section 48C – Qualifying Advanced Energy Project Investment Tax Credit

The 48C credit, also known as the Qualifying Advanced Energy Project Investment Tax Credit, was first introduced in 2009 following the enactment of the America Recovery and Reinvestment Act. This tax credit was aimed at supporting the development and implementation of advanced energy projects, including those related to renewable energy assets and other property that reduce greenhouse gas emissions. Following the Inflation Reduction Act (IRA), which congress passed in 2022, the credit was expanded to include projects related to carbon capture, utilization and storage, energy grid modernization, renewable fuel generation and refinement, components of electric vehicles and recycling facilities for eligible components.

Businesses must apply for the credit through a competitive process managed by the Department of Energy. Upon recommendation from the Department of Energy, the IRS will award $10 billion in 48C credits. The first round of applications closed in Aug. 2023.

The second round is expected to be launched in 2024 and will allocate the remaining $6 billion of credits.

Although the base amount of the 48C tax credit is 6%, it can be as high as 30% for qualified energy projects that meet additional requirements. Corporations and flow-through entity shareholders that are unable to utilize credits may sell them for cash under the new credit transfer provisions under the IRA.

Section 45X – Advanced Manufacturing Production Tax Credit

The 45X credit, also known as the Advanced Manufacturing Production Tax Credit, is a new credit following the enactment of the IRA. It was created to encourage the production and sale of energy components in the U.S., specifically related to solar, wind, batteries and critical mineral components. To be eligible for the credit, components must be produced in the U.S. or U.S. possession and sold by the manufacturer to unrelated parties.

Unlike the 48C Credit, which is administered through an application process, the 45X credit is a statutory credit. There is no limit toward the total amount of credits awarded, however it is scheduled to begin phasing out in 2030 (and will be completely phased out by 2034). A list has been released by the Department of Energy detailing the eligible components and corresponding credits. Manufacturers will not be allowed to claim a 45X credit for a facility that has already claimed a 48C credit.

Section 45W – Qualified Commercial Clean Vehicles Credit

The 45W credit, also known as the Qualified Commercial Clean Vehicles Credit, was established by the IRA to motivate businesses and tax-exempt organizations to invest in eco-friendly commercial vehicles.

45X can provide a substantial benefit, with the potential to receive up to $40,000 in credits.

However, for lighter vehicles, specifically those with a gross weight rating below 14,000 pounds, the credit is capped at $7,500.

The amount of credit received hinges on the lesser of two figures: either 15% of the vehicle’s cost (this percentage jumps to 30% for vehicles that don’t rely on gas or diesel engines) or the so-called incremental cost. This incremental cost represents the difference in price between the clean vehicle in question and a comparable conventional one that runs solely on gasoline or diesel, considering factors like size and intended use.


Working with a qualified tax advisor experienced in the manufacturing industry can help you determine if you qualify for these credits. This effort can pay off significantly, reducing your tax burden and providing much-needed funds to reinvest in growth. Contact an Adams Brown advisor if you have any questions about your tax situation.